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IFoA SP8 study materials
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IFoA SP8: General Insurance Specialist Principles

IFoA SP8 · Work through your exam, one topic at a time.

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General Insurance Specialist Principles

SP8 General Insurance Specialist Principles tests whether you can apply actuarial technique to real portfolios - pricing, reserving, capital and reinsurance - rather than recite formulae. Expect scenarios with sparse or messy data and a request for a reasoned recommendation.

Pricing

  • Split expected loss into frequency and severity; fit GLMs (Poisson for counts, gamma or Tweedie for average cost) using categorical rating factors.
  • Check the exposure base (earned car-years, written premium), and allow for trend, seasonality and large-loss loadings.
  • Load for expenses, commission, profit and reinsurance cost; express the output as a rate change or loss ratio, not just a pure premium.

Reserving

  • Reserve equals best-estimate ultimate minus paid to date; a risk margin is added on the regulatory balance sheet.
  • Chain ladder assumes stable development; Bornhuetter–Ferguson blends an a priori loss ratio with reported claims and is safer for immature years.
  • Test sensitivity to development factor selection, the tail, claims inflation and reinsurance recoveries.

Reinsurance and capital

  • Quota share and surplus share are proportional; risk excess of loss responds per event above a retention, and reinstatements cost extra premium.
  • The SCR comes from the standard formula or an internal model; catastrophe loads come from vendor or in-house cat models, validated against experience.

Worked example

Cumulative paid: DY1 1,200 → DY2 1,500 → DY3 1,650, giving factors of 1.25 and 1.10. An accident year at DY1 has paid 1,000. Ultimate = 1,000 × 1.25 × 1.10 = 1,375, so IBNR is 375. If earned premium for that year is 1,600, the ultimate loss ratio is 86% - compare it with the pricing target before concluding the year is unprofitable.

Traps that cost marks

  • Mixing cumulative and incremental triangles, or ignoring the tail for liability classes.
  • Quoting a reserve without saying whether it is discounted and whether it is gross or net of reinsurance.
  • Forgetting reinstatement premium when costing an excess of loss layer.
  • Treating GLM output as final without credibility weighting or judgement on thin cells.